Last night Stephen Timms addressed the IT Chapter of the Institute of Chartered Accountants. His audience was a mix of IT and Accounting Professionals, including members of the Chartered Institute of Taxation. Readers of this blog will know my concerns over the implementation plans for the Universal Credit but I have focussed on those of DWP. In the course of his speech Stephen, as a former Financial Secretary to the Treasury and sometime IT professional, took an equally cool look at the HMRC side of the project: the plans for Real Time Information on PAYE and their effect on small firms and their willingness to employ staff who might well be on the margins of employment – those who the Universal Credit is intended to help into the world of work.
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I do not agree with all that he said. You would be surprised if I did. But I do recommend that you read his word in full (see below) particularly his comments on where the blame should lie – with those who told ministers they could deliver the impossible (that is my rewording of what he said more politely). I personally believe that applies even more to the external consultants and suppliers paid to supplement the skills of officials who knew they were out of their depth.
But that is enough from me. Thank you to Stephen for permission to reproduce his words in full.
Thank you for the opportunity to be here. Apologies that I couldn’t be here at the start.
I was elected to Parliament in 1994, after sixteen years in the IT industry – eight years with Logica, a background I have in common with Sally, and then another eight years with a smaller consultancy, Ovum. In twelve years as a Minister I was deeply interested in policy on telecommunications and computing, and in the potential for IT to improve public services.
I want to focus this evening on the vast new IT system, or rather systems, required for Universal Credit from next October. But the title ‘Good Data for Good Government’ raises a broader issue, and let me just start with that.
As a Minister before the last election, I launched the data.gov.uk website, and the initiative to put as much Government data as possible into the public domain. That initiative has been maintained and extended, with leadership from Francis Maude at the Cabinet Office. The case for it was well set out in the Open Public Services white paper published in July last year.
The Prime Minister, in his foreword to the White Paper, condemns – I quote: “those who resist reform, put the producer interest before the citizens’ needs, and object to publishing information about how services perform” and go on to argue that: “it is only by publishing data on how public services do their jobs that we can wrest power out of the hands of highly paid officials and give it back to the people.”
The white paper goes on to assert – rightly in my view – that: “Open public services that are more accountable to the people they serve (both the users and the taxpayers who fund them) will be better services”, and states that “Providers of public services from all sectors will need to publish information on performance and user satisfaction.”
My complaint is that its not being delivered in practice. I am the shadow minister for employment, and scrutinise the Government’s Work Programme. Major firms like A4E have contracts to help unemployed people into jobs. It has been running for almost eighteen months. No data at all has been published yet on how many people have got into jobs. The first data will finally be published next week.
Contrary to the white paper promise that “Providers of public services from all sectors will need to publish information on performance and user satisfaction”, Work Programme providers have – extraordinarily – been banned from publishing any data at all on their performance. They all used to publish their own performance data. They would like to do so on the Work Programme, but they have been told they risk losing their contracts if they do so. On user satisfaction, highlighted in the white paper, they are not even collecting data, let alone publishing it. The commitments in the Open Public Services white paper are simply being ignored.
Why is that? Its because Ministers don’t want embarrassing questions about performance. As our title this evening suggests, good data is a powerful lever for better services, and better Government. The converse is also true – that when data is hidden, however much that might suit Ministers, services are less effective then they could be. The Work Programme has fallen short of its potential, because of secrecy.
The potential for Government IT
IT disasters in Government attract huge public attention. You could be forgiven, if you read newspapers, for thinking Government IT projects are always disastrous. They are difficult. They are often much bigger than commercial systems. The National Audit Office has done excellent work on how to make them succeed rather than fail.
One of the most successful programmes I worked on was the Benefit Payment Automation project. Ten years ago, sixty per cent of all benefit payments were made via giro cheques, costing £1.49 a time, or order books, costing 67 pence per transaction. Only 40% were made direct into bank accounts, costing one penny a time. The system was largely unchanged from wartime ration books.
We decided that benefit payments should instead be made automatically into accounts. For those without bank accounts, there would be a new post office card account. Cash can be withdrawn with a card and PIN at post offices.
Changeover was in summer 2004. A PIN entry terminal had to be on every post office counter in the country, all networked together. Technical disaster was foretold. There was also widespread concern that – for example – elderly people unused to bank accounts would forget their new PIN when the system went live.
In fact, it went without a hitch. By May 2005, 97% of benefit recipients were using automated payment. It was a much better service. 95% of those who had changed over were happy. Order book fraud used to cost £50 million per year, with 100 order books stolen every week. That has been eliminated. Overall, well over a billion pounds has been saved.
Success wasn’t an accident. The risks were assessed and understood, and great care taken to manage them. Andrew Smith, Social Security Secretary at the time, chaired a regular meeting of Ministers from each of the departments involved, to talk through possible problems, and resolve them. Those efforts paid off.
I am worried that those lessons have not been learned for Universal Credit.
I support the principle of Universal Credit. Merging today’s numerous different working age benefits into one is a good idea. Its advantages have been oversold. It will not, as sometimes claimed, solve all the problems of the benefit system. But it is a sensible thing to do.
There are big challenges around doing it, and some have simply not been resolved. For example, at the moment, free school meals are available to families on means-tested out of work benefits, but not to those on in work benefits. Under Universal Credit, the distinction between in work and out of work benefits will disappear, and a new basis will have to be found for determining who is entitled.
It appears the Government may well introduce a crude income threshold. If your family income is more than X thousand pounds per year, you will no longer qualify for free school meals. That would create a huge disincentive for parents earning just below X to gain a pay rise – because they will instantly lose free school meals for their children. This is precisely the kind of work disincentive in the benefit system which Universal Credit is supposed to remove. In this case, it will make it much worse.
Another mistake is that it is in fact going to be a Not-Quite-Universal Credit. Council Tax support is going to be missed out. This is throwing away some of the gains from having just one working age benefit. It is also creating enormous challenges for local authorities, who are supposed to be running new localised schemes by next April. Software companies warned months ago that there wouldn’t be time to implement the IT. Some local authorities have given up, announcing they will carry on with the existing scheme for a year, and take the ten per cent cut somewhere else in their budget. We shall see how this goes over the next few months, but it does give an early warning of what may be ahead for Universal Credit itself.
The key mistake with Universal Credit has been to commit to an unrealistic timescale. I wrote to Iain Duncan-Smith two years ago, saying it couldn’t be achieved. He sent me a polite reply, but pressed on. Serious problems lie ahead as a result.
The first sign of trouble was in the green paper, “21st century welfare”, published just after the election, in July 2010. That said, and I quote, “The IT changes that would be necessary … would not constitute a major IT project.” That was absurd. Flat denial of the scale of the task is the worst possible start.
The time between second reading of the legislation, when work can start on IT development, and implementation of the new benefit was to be just thirty two months. That is only a few months longer than for Employment and Support Allowance, a far simpler benefit whose introduction in October 2008 I was responsible for. It isn’t enough.
Universal Credit doesn’t just involve the Department for Work and Pensions. That Department’s task – of rewriting the software for the entire working age benefit system – is large enough. When I questioned the Department, they told me I shouldn’t worry because its all being done in Agile. We shall see.
Universal Credit also requires Her Majesty’s Revenue and Customs to implement the PAYE Real Time Information system, which the members of this Institution will get to know well. It will require every firm in the country to inform HMRC of PAYE information for every employee on or before every payment date, instead of annually.
It is a huge change, to be rolled out from April to October next year. Many businesses are unaware of it. HMRC tells me we needn’t worry, because new releases of payroll software will do what is needed automatically – employers will hardly notice the change.
But, as Members of this Institution know better than anyone, there are quite a few employers who will not have the latest payroll software in place for next April. Some don’t have computers. ICAEW has pointed out that, on the latest data, about 10% of firms don’t use the Internet. There are still rural areas without broadband. Many firms have no idea they have to start monthly PAYE returns from next April.
Last week, the Institute said in a press release: “Many businesses will find the new Pay As You Earn (PAYE) reporting system impossible”. Frank Haskew said that HMRC’s plan “completely ignores the way the real world works”. Accountancy Age has called for the whole thing to be put back a year.
ICAEW has also been right to highlight the problems for self employed people. Unlike tax credits, which have been very supportive of self employment, Universal Credit will assume that the self employed are earning at least the minimum wage for every hour they are working, and reduce their benefit accordingly. This is, of course, completely unrealistic for many self employed people – most obviously when they are starting their business, but – for some – when they hit problems later on.
Under pressure, the Government has conceded that this will not apply during the first year of self employment – a concession that will be available only once in any individual’s lifetime. But there is a real danger that self employed people will find their businesses unviable, when they needn’t be, under the new system.
And ICAEW has also highlighted that self employed claimants will have to submit monthly accounts on both a cash-based and an accruals basis. The mind boggles.
An RTI pilot is under way, but a written parliamentary answer told me that, in the pilot, no data will actually be passed to DWP. Whether that interface works in October for calculating Universal Credit remains to be seen.
So I wasn’t too surprised when the official in charge of Universal Credit in DWP went off on sick leave last month, suffering from stress. And the official in charge of IT has left the project as well.
The Prime Minister told the House of Commons today that the Universal Credit project is on schedule. In fact, the commitment that all new applications for out of work benefit will be treated as Universal Credit applications from next October has slipped at least a year.
If they can at least avoid chaos for claimants, that might just be an embarrassment to the Government. But the problems for small firms with the PAYE changes will be serious. They are the result of ignoring warnings and taking an over optimistic view of the challenge from the outset. One person close to the project tells me there will be a train crash in May or June next year, as the RTI system starts to generate spurious penalty notices, and there is now nothing anyone can do to avert it.
The timescale for Universal Credit implementation was unrealistic from the start.
The ideas have a lot to commend them. The aims and the principles are generally laudable. But it is so easy for them to be thwarted by poor planning – in particular, as, it seems to me, in this case, by adopting an unrealistic timescale.
Far better to be cautious, to take the time to manage risks properly, and so – as with Benefit Payment Automation – to secure a successful outcome.
I fear that will not be our experience of Universal Credit, and that a great deal of unnecessary work for employers, and – potentially, in some cases, financial hardship for employees – could be the disastrous result.